The headline reading is a 10-month high but UK manufacturing activity continues to observe a downturn at least for now. Both output and new orders continue to decline while the Red Sea crisis is leading to supply disruptions. This reaffirms a more challenging environment, even with some improvements seen as of late. S&P Global notes that:
“UK manufacturers faced challenging circumstances
in February, as the ongoing impact of the Red Sea crisis
delayed raw material deliveries, inflated purchase prices
and impacted production capabilities. There were also
knock-on effects for demand, as new export orders were
hit by both supply disruptions and higher shipping costs.
Production volumes subsequently contracted for the
twelfth successive month while total new orders fell at the
sharpest rate since October.
“The impacts were felt particularly hard on the price and
supply fronts. Input cost inflation hit an 11-month high,
leading to a further increase in selling prices. Average
supplier lead times meanwhile lengthened to the greatest
extent since mid-2022. Several manufacturers noted that
they faced the difficult choice between accepting delays
from re-routed shipping or facing the prospect of paying
higher prices to source from closer to home. This comes at
a time of already heightened cost caution at manufacturers
in response to weak demand, as highlighted by further cuts
to employment, purchasing and inventories in February.
“Although the supply impact and effect of prices is
muted by standards seen at the height of the pandemic,
any upward pressure on inflation will be a concern to
policymakers and may add to calls that it is too early to be
confident on the timing of interest rate cuts.”
